It’s that special time of year. Snuggled right in with Black Friday, Cyber Monday, Thanksgiving, and the start of real holiday shopping — the Open Enrollment Period for your health insurance plan. If you are not sure how to get your own health insurance, this guide will help you compare health insurance plan options.
“Navigating health insurance in the U.S has never been more fun or exciting. Especially if you’re self-employed or currently ‘rolling the dice’ and living without insurance.”
Said no one, ever.
Unfortunately, health insurance can sometimes feel like a necessary evil. If you have insurance provided through an employer, you can probably ignore this time of year and carry on, business-as-usual. But, if you are self-employed or on a state needs-based plan, you should commit these dates to your memory.
Open Enrollment and Special Enrollment Periods
November 1st – December 15th marks the Open Enrollment Period for health insurance. This is the time of year when you can make changes to your health insurance plan. This is also when you can compare your current health insurance plan against others.
Or you can get insured on a new plan if you are currently going without insurance. Fortunately, if you need to make changes to your insurance, we are now in the Open Enrollment Period.
Again, this is the only time of the year where you can make insurance changes- unless you qualify for a Special Enrollment Period.
A Special Enrollment Period is a 60-day window from a life-changing event that would cause you to need new insurance. Common events include; getting married, divorced, having a baby, losing a job, and moving.
When you enroll in a new plan, your coverage will begin on January 1st the following year.
What happens if you don’t qualify for a Special Enrollment and miss the Open Enrollment? You’ll have to wait for next year’s Open Enrollment. This means potentially another year (or more) without coverage.
If “get insurance” has been an item on your to-do list, make sure you put these dates on your calendar. When you are ready to compare insurance plans, you will use the marketplace on healthcare.gov. This is the government website that hosts all of the available insurance plans and all of the information about enrolling.
The healthcare link is also where you go if you are enrolling for the first time or applying for a needs-based plan.
What you should be comparing in a health insurance plan.
- Monthly premiums that don’t break the bank
- Deductibles and out-of-pocket-maximums that won’t put you in debt
- If current doctors are in-network and prescriptions
- Office visits and co-pays that work for your health needs
- Compare plans that are HSA compatible.
1. Monthly premiums that don’t break the bank
The first thing to compare in health insurance plans is the premium. Your monthly premium is the amount you pay to have insurance. The dollar amount will probably be what your eyes naturally gravitate towards when you’re shopping for plans.
This number will also likely be what impacts you most financially unless you expect a lot of visits or out-of-pocket costs. Comparing the monthly premiums of your insurance plays a big part in choosing your plan.
Monthly premiums will vary depending on the type of coverage you have. Great health insurance comes at a price, and the better your insurance is, the higher the monthly premium will be.
Your age and location will also impact your monthly premium. A 26-year-old Tina in Idaho might pay less than 36-year old Theo in Florida, even if they have similar plans and coverage.
Deciding how much you can afford versus how much insurance coverage you’d like isn’t a fun decision to make. In a way, you’re gambling on your health. Do you go to the doctor frequently or expect 2021 to be an expensive year with doctor’s visits?
You might be better off on a plan that provides more coverage at the cost of higher monthly premiums. If you are healthy and rarely use the doctor, you might feel more comfortable on a cheaper plan.
The key to comparing premiums is finding the balance between what you can afford and the care you need.
Premium Tax Credit
What if you are not earning a high-income and the thought of trying to afford insurance is stressing you out? See if you qualify for the Premium Tax Credit.
This is a tax credit that is given based on income and members of your family. The credit can be applied immediately and will lower your monthly premium (sometimes up to hundreds of dollars).
To see if you qualify, you can read more about the Premium Tax Credit here. This tax credit can make paying for insurance from “no way” to “annoying, but doable.”
Insurance searching tip: Plans on the marketplace operate on a metallic tier structure. Bronze plans are typically the cheapest and have the least coverage. Next is Silver, and then Gold, which will have the best coverage and likely be the most expensive.
2. Deductibles and out-of-pocket-maximums that won’t have you swimming in debt
What’s the next thing you should be comparing when you’re shopping for a new health insurance plan? The deductible and max-out-of-pocket.
These amounts might be the same on some plans, but it’s common to see out-of-pocket maximums that are higher than the deductible. Make sure you understand the difference between the two.
The deductible
Your deductible is the dollar amount you need to pay before insurance kicks in and starts sharing the cost. Whenever I think about deductibles, I imagine surviving a horrific accident — and how much it will cost.
A little morbid, yes, but isn’t this what insurance is for? Having an $8,000 deductible means you are responsible for paying $8,000 of medical costs before insurance shares the cost. Once you hit that magic number, insurance kicks in and starts paying their agreed percentage.
Coinsurance is the percentage of your medical costs that you are responsible for paying. Depending on the tier your insurance is in, this could be anywhere from 10-50%. If your coinsurance is 20%, that means your insurance will cover 80% of your medical costs, leaving you with 20%.
Please note that insurance these days often has you paying the $8,000 out of pocket first and then only pay 80%. Pay attention to all of the things insurance is currently charging for your premium and what you really get. Shop around if you can.
The out-of-pocket maximum
An out-of-pocket maximum is different than the deductible. The out-of-pocket maximum is the most you will have to pay in a given year and is the total of your deductible amount plus what you pay in coinsurance.
Once you hit your out-of-pocket max, your insurance starts paying 100% of your costs — not just the percentage it was previously paying (sometimes–make sure you have the truth). Some plans have the deductible and max-out-of-pocket as the same amount, but if they are different, now you understand why.
Your insurance works on a calendar year basis, and your deductible and out-of-pocket maximums start over at $0 every year on January first. Keep this in mind if you have the choice of scheduling visits at the end of the year if your deductible has already been met.
Premiums DO NOT count towards your deductible or max out-of-pocket.
A high versus low deductible
Comparing a health insurance plan with a low or $0 deductible versus a high one will really vary depending on each person — and what you can or cannot pay in premiums.
ou will want to consider both your health and financial comfort level. Anticipating a lot of healthcare costs in 2021? You should probably look for a lower deductible, higher coverage plan.
Do you feel healthy and not visit the doctors often? You might opt for a higher deductible plan with lower coverage and lower premiums. Always weigh in the possibility of unexpected costs and emergency visits.
A responsible personal finance planning move would be to make sure you have enough money saved to cover your deductible. Try to save an emergency fund or begin a Health Savings Account.
Having an amount set aside means avoiding a stack of medical debt if any unfortunate and expensive costs arise. Unfortunately, most people get on the cheaper plans with high deductibles because that is all they can afford.
Without adequate savings, healthcare can quickly become very expensive.
3. If Current Doctor’s are In-Network and if Current Prescriptions are Covered
Many people have been with their doctor for years and don’t want a new one if they switch insurance. If you are happy with your doctors or specialists and want to continue seeing them, include them in your search or your insurance application.
Not entering your doctors in your search means you could be moving out of their network. Going to an out-of-network doctor or specialist is typically more expensive than a doctor who is in-network.
f staying with your current doctors is a priority, make sure you are shopping plans within their network. Are you someone who sees multiple specialists and doesn’t want to get a referral from your primary doctor beforehand?
Then you should also be checking if referrals are needed when you are comparing plans. A (have to) referral is typically the difference between HMO (Health Maintenance Organization) plans and PPO (Preferred Provider Organization) plans, but options will vary state by state.
If you are taking any prescription drugs, you should be entering those drug names into your application and search too. Entering your prescriptions will give you an accurate estimate of what they would cost on a new plan.
You will also see what tier your prescription medications fall in. Make sure the drug copay is something you can afford if it’s something you need regularly.
4. Office visits and copays that work for your health needs
The next cost to consider when you are comparing health insurance plans is the copayment. Chances are you have been through a copay change in your own life. Or, you may have sat in the doctor’s waiting room and overheard what someone’s copay is. Or you’ve heard how some people seem to have none.
Your copay, or copayment, is the amount you’re responsible for paying when you make office visits or pick up prescriptions. The copay amount will depend on the type of insurance you have.
art of the Affordable Care Act was to ensure all plans have to include a free annual preventive visit with your primary doctor (which may or may not include a copay). Beyond that, the price of your visits could vary greatly.
Just like making sure your scripts are covered, you’ll also want to make sure you can comfortably afford the copay (there always IS one). There might be different copays when you visit your primary care doctor, specialists, emergency room, and urgent care.
Women will also want to compare the coverage and copays of OBGYN visits, prenatal, and postnatal care. If children are going to be on your plan now or in the near future, you should also check pediatric services. Compare the coverage and copays for these services as well!
Compare health insurance plan details in the summary of benefits.
Some of this information, like primary care visit copays, will probably be available on the main screen of your search when you are comparing plans on the marketplace.
To learn more about your coverage, you should be digging a little deeper into your plan details. I always recommend looking at and downloading the plan’s “summary of benefits.”
The summary of benefits will give you a lot of necessary information about the plan you’re considering. Don’t forget to save a copy to your files for the plan you end up choosing. Inside the summary of benefits, you will be able to see the copayment you’ll pay for each type of visit.
You will also see more details of what is included in your coverage. If you are in the family growing stage of your life, you will want to make sure you look at the “if you are pregnant” section, where you will see the cost of prenatal and postnatal visits and the cost of childbirth and delivery.
Make sure to also compare these costs against other companies when you are shopping for a new plan. One plan might look great on the outside (in terms of the premiums and deductibles displayed on the main screen), but it could be a whole different story when you look at the costs of the services you’ll be using.
It doesn’t hurt to download several summaries of benefits to make sure you get what you need.
5. Compare health insurance plans that are HSA compatible
The final consideration when you are comparing health insurance plans considers the Health Savings Account. An HSA, or Health Savings Account, is an unknown gem when you are shopping for insurance.
Certain high-deductible plans allow you to open an HSA, an investment account that is designated specifically for medical costs. Like a retirement or brokerage account, an HSA can be opened with an administrator or custodian, like Fidelity. Also, check with your bank.
You may also be able to open one at a local bank or credit union, but your investment options might be limited.
HSA tax perks
Beyond having a designated spot for having medical savings, there are also some nice tax-perks that come with an HSA. The first tax benefit is that contributions to your HSA are tax-deductible, meaning you will write them off at the end of the year.
The write-off is lowering your taxable income, meaning you will pay less in taxes. The second tax perk is that your invested money will grow tax-free. The third perk is that any withdrawals from this account for medical expenses are, again, tax-free.
If you have an HSA for 2021, you can put a maximum of $3,600 in this account as an individual or $7,200 as a family. Let’s see an example. Say you are self-employed and you make $50,000 for the year.
You are the only one on your health insurance plan, so you contribute the maximum amount of $3,600 over the year (or $300 per month). That amount gets deducted from your income when you do your taxes.
Not looking at any of your other tax considerations, your taxable income is now $46,450. This means you are not paying taxes on this $3,550.
Long-term growth
Once inside your HSA, you can invest your money, giving it the potential to grow with the stock market. You should be doing your research before investing or talk to a financial professional where your HSA is kept.
If your money grows 8% over the next year, your balance would be $3,844.65. That $294.65 of market gains is yours, tax-free. You can treat this as a medical emergency savings account and try to build your balance over the years.
The total balance in your account is eligible for tax-free withdrawals for qualified medical expenses at any time. This tax-free withdrawal is your third tax-benefit. Unlike a Flexible Spending Account or FSA, your HSA does not start over each year.
The account stays with you, regardless of your employer or employment. That means this account has the potential to get pretty big if you continuously fund it and allow it to grow.
Just remember, the money is only there for medical purposes, but don’t hesitate to use those funds if needed.
Pulling money out for non-medical expenses
Remember, these accounts are designed to help pay for medical costs to those who are on a high-deductible plan. If you pull your money out for non-medical expenses, you will have to pay income tax on the withdrawal and an additional 20% penalty.
Taking this HSA or FSA out for anything other than a qualified medical expense wipes out any tax benefits of this account. Make sure the money you are putting inside is not needed for other expenses or non-medical emergencies.
An interesting rule to keep in mind with the HSA is that 20% of a non-medical penalty falls off when you reach age 65.
without this extra tax, you can make withdrawals from your HSA just like you would a traditional IRA. You will still owe income tax on withdrawals, but you are still reaping the tax advantages of the tax-deferred growth inside the account.
People preparing for retirement should keep the HSA in mind as another potential source of retirement income.
Don’t let comparing insurance plans cause unnecessary stress.
There are many considerations, and it can be easy to get overwhelmed when you’re comparing insurance plans. Don’t let this prevent you from getting insured.
The tools and resources available on healthcare.gov make it easy to input your needs and compare plans. When you know what you’re looking for, your insurance enrollment will be much smoother.
If you want more tips on getting insurance as a business owner, check out this post. If you have been putting off enrolling in a health insurance plan or shopping for a new one, time is running out for 2020’s Annual Enrollment Period.
Even if you have active coverage, it is still worth taking a peek every year to make sure you are still paying a competitive rate and getting quality care.
You have until December 15th to make changes to your health insurance or enroll in a new plan. All changes will be effective on January 1st, 2021.
